If you missed May’s budget announcement, don’t worry, we’re here to catch you up one of the areas that has generated the most excitement.
What is #budgetfrenzy?
In this year’s budget announcement, Treasurer Joe Hockey announced that – effective immediately and running right through to June 30, 2017 - small businesses with an operating income less than $2,000,000 will be allowed to claim a tax deduction for the full value of assets worth up to $20,000. This was a fast improvement over the previous claim ceiling of $1,000, after which purchases needed to be depreciated over eight years. It was designed to reinvigorate investment in the retail space by businesses in what was coined a #budgetfrenzy.
What does this mean?
Basically, this means that you can reduce your tax rate by claiming asset purchases of a value of up to $20,000. Small businesses have previously been able to reduce their tax rate on purchases through depreciation over multiple years (previously an asset costing $20,000 would have been depreciated at 15% in the first year, and 30% for subsequent years), but now it can be done up front, which could mean big things for your business.
What can I buy?
This will depend on what your business does. The official language says that this concession is to allow small business to purchase ‘productive assets to help them grow their business.’ So unless you’re a games developer, you may have to take the Playstation 4 out of your shopping cart.
But this does mean that other big ticket electronics like laptops, tablets and mobile phones could be claimed. In fact, an online electronics store called Kogan is offering an 'Ultimate Budget Bundle' which costs $19,901 and includes televisions, laptops, tablets and a smartphone.
Although, before you go sizing up your desk for a plasma screen television and an extra wide monitor, remember that you’ll still have to spend the money in the first place, and you won’t get 100% of it back. #BudgetFrenzy is a way to reduce your tax liability concerning your small business and money, you should be extra careful.
Can I claim anything I want?
Sadly not quite, the expenses will have to be for things that are relevant to your business, and can only be claimed on assets. So you’ll have to be sure you can prove that everything you buy is a must for your business.
Your needs will obviously vary depending on the nature of your business and your industry, but you should have a good answer for why you bought something before you buy it. If all you can think of is, 'for the tax deduction.' then you might be buying it for the wrong reasons.
What's trending right now?
- Also Read: Try Our Tax Deduction Calculator to See What You Can Save
- Also Read: How You Could Pay $10,000 for a $20,000 Work Car
- Also Read: Tax Return Tips and Tricks
Why has this happened?
The short answer is that spending is good for the economy. The Treasurer wants to encourage people to hit the shops and move their money about, but it is also about making life easier for small businesses allowing them to purchase what they need to survive. This is new ground for Australia, so it might be a while before we really know the positives and negatives.
DISCLAIMER: Many of the comments in this article are general in nature and anyone intending to apply the information to practical circumstances should seek professional advice to independently verify their interpretation and the information applicability to their own particular circumstances